On a mixed day for gaming stocks, Penn Entertainment (NASDAQ: PENN) rallied 4.70% on a report that Flutter Entertainment (NYSE: FLUT) is considering joining Boyd Gaming (NYSE: BYD) in a takeover bid for the regional casino operator.
Boyd’s purported pursuit of Penn, which has not been publicly confirmed by either side, is several weeks old, but news of Flutter potentially being involved is new and was initially delivered earlier today by TheDeal. Citing unidentified sources, the outlet reportd Flutter, the parent of FanDuel, could partner with Boyd, acting as a buyer of Penn’s digital assets, including ESPN Bet.
That speculation surfaced less than three weeks after reports emerged that Boyd was mulling a bid of at least $9 billion for rival Penn. There is some logic in the possible inclusion of Flutter because Boyd has a long-standing relationship with the Irish gaming company. The Las Vegas-based regional casino operator owns 5% of FanDuel.
How Flutter Could Help Boyd Execute Penn Deal
Rumors regarding Boyd’s potential interest in Penn are close to a month old and over that time, analysts have consistently rejected the notions that Penn is a willing seller and that Boyd could easily execute a $9 billion or larger transaction.
Some analysts have noted that one hurdle in a Boyd takeover of Penn is that the suitor wouldn’t want to pay up for ESPN Bet, meaning a third party would have to get involved to buy Penn’s interactive unit. Should that party emerge and potentially offer Penn at least $500 million for its digital gaming arm, that would reduce the per share price Boyd would need to offer to get Penn to come to the bargaining table.
Translation: Boyd might want Penn’s land-based casino assets, but it probably doesn’t want ESPN Bet and related pieces. Flutter could have use for those entities.
ESPN Bet has roughly 6% market share in online sports betting and under the Hollywood Casino brand, Penn has resources to make waves in iGaming. Those could be appealing traits to Flutter.
Flutter Could Help, Not Solve All Issues in Possible Boyd/Penn Deal
Flutter buying Penn’s interactive business would serve the objective of lowering the price for the regional casino operator, thus making a bid more palatable for Boyd, but that’s just one hurdle.
Even with ESPN Bet and Hollywood Casino out of the way, a Boyd acquisition of Penn would likely be slow to reach the finish line because of regulatory complexities. The two companies operate regional casinos in many of the same states. By some estimates, at least 10 states’ gaming regulators and the Federal Trade Commission (FTC) would have to approve the deal.
That implies that before Boyd and Penn could sign on the dotted lines, one or both would likely have to commit to asset sales in certain states — mainly in the Midwest and the South. Asset sales could be difficult to execute over the near-term due to high interest rates and restrained consumer spending in some regional gaming markets.
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